The Organizational Roots of Market Design Failure: Structural Abstraction, the Limits of Hierarchy, and the California Energy Crisis of 2000/01

Economic sociologists have rarely studied organizational reasons why market design processes fail. Drawing on the organizational literature on mistakes and accidents, the paper identifies such reasons for a fatal design decision during the creation of California’s first electricity markets. Designers proposed weak oversight structures even though their models called for active and permanent regulatory control. Sellers like Enron could therefore manipulate the market without fear of detection, prolonging the western energy crisis. A process of “structural abstraction” explains this mistake. Designers were split into three groups that worked in different divisions and relied on local frames to understand the oversight requirements. Each group missed information the others were aware of and arrived at the conclusion that minimal oversight would suffice. Higher levels of the hierarchy should have discovered and resolved these discrepancies. However, these levels considered the issue at a higher level of abstraction. Such structural abstraction made room for ambiguities that obscured the local disagreements..Die Wirtschaftssoziologie hat selten nach organisationstheoretischen Gründen gesucht, um zu erklären, warum Marktdesign fehlschlägt. Dieser Artikel verwendet die Literatur zu Unfällen und Fehlern in komplexen Organisationen, um eine fatale Fehlentscheidung zu erklären, die während des Designs der ersten Elektrizitätsmärkte von Kalifornien geschah. Obwohl ihre Modelle aktive und schlagkräftige Kontrollinstanzen verlangten, setzten sich die Designer für ein schwaches, fragmentiertes und temporäres System ein. Dies ermöglichte Energieunternehmen wie Enron, die Märkte zu manipulieren, ohne befürchten zu müssen, entdeckt zu werden, und trug so zur Verlängerung der kalifornischen Energiekrise von 2000/01 bei. Um die Fehlentscheidung zu erklären, schlägt das Papier den Begriff der „strukturellen Abstraktion“ vor. Die Designer waren in drei Gruppen aufgespalten, die in unterschiedlichen Teilen der Organisation arbeiteten und lokalen Interpretationsmustern folgten. Dabei übersah jede Gruppe wichtige Informationen, die den jeweils anderen bekannt waren. Manager auf höheren Ebenen der Hierarchie hätten solche Diskrepanzen eigentlich entdecken und auflösen sollen. Doch sie diskutierten das Problem auf einer höheren Abstraktionsebene. Diese strukturell bedingte Abstraktion führte zu Ambiguitätstoleranz und verschleierte die Uneinigkeiten unter den Akteuren in den Designteams.Contents 1 Introduction 2 Explaining market design failure Politics and epistemic gaps Organizational failure and structural abstraction 3 Data and method Data Method Limitations 4 Setting: The creation of California’s oversight structure 5 Analysis Existing explanations: Politics and epistemic gaps Intellectual fragmentation obscures oversight requirements Structural abstraction and the limits of hierarchy Supporting the counterfactual: California’s ancillary service crisis 6 Conclusion Reference

Conceptual Limits of Performativity: Assessing the Feasibility of Market Design Blueprints

Market designers work as social engineers. They create institutional structures to enforce the assumptions of theoretical market mechanisms. Despite much work on performative effects of economics, sociology has not analyzed the feasibility of designers’ theoretical blueprints. This article suggests that this may be done by identifying assumptions that derail the mechanism if they are not enforced. Sociologists then need to trace obstacles to their realization in practices of implementation. Blueprints are infeasible if the assumptions cannot be enforced either by themselves or jointly. To illustrate the approach, the article identifies one such assumption and traces its impact on a historical experiment of market design: the creation of markets for transmission capacity in California’s electricity markets. To realize the design’s explicit assumptions, designers built institutions that violated an implicit uniformity assumption and created opportunities for manipulations. Since the design’s assumptions could not be realized simultaneously, it was infeasible.1. Introduction 2. Performativity studies, market design and blindspots 3. Data and case 4. The blueprints for transmission pricing 5. Evaluating the blueprint 6. Discussion and Conclusion Footnotes Acknowledgements Reference

Discursive Multivocality: How the Proliferation of Economic Language Can Undermine the Political Influence of Economists

This article shows how the proliferation of economic language can undermine the political authority of economists. The argument emerges from a comparative case study of two early experiments with electricity market design. Relying on archival materials and 30 in-depth interviews, I examine why political actors ignored the advice of economists in California, while they deferred to the experts in the Pennsylvania, Jersey, Maryland (PJM) region. The debates were framed in economic language, but stakeholders interpreted central concepts differently without recognizing the resulting ambiguities. This ‘discursive multivocality’ undermined economists’ authority as experts. It challenged economists’ monopoly on the interpretation of economic concepts and undercut rhetorical strategies to reassert the superiority of their understanding. At the PJM Interconnect, the experts overcame this problem by switching to a different conceptual apparatus. Ironically, economists could establish their authoritative understanding of economics by appealing to a shared understanding of engineering problems.1. Introduction 2. Discursive multivocality and the political influence of economists 3. Electricity market design in California and PJM 4. Data and methods 5. Analysis 6. Conclusion Acknowledgments Reference

Who Captures Whom? Regulatory Misperceptions and the Timing of Cognitive Capture

To explain cognitive capture, economic sociologists often examine the structure of relationships between regulators and market participants. This paper argues that the nature of regulators' misperception should be subject to analysis as well. Different types of misperceptions develop over timelines of varying lengths. Depending on the misperception, different sets of relationships and parties may therefore be the cause of regulators' capture. The paper illustrates this point with a case study of regulators' failure to detect pervasive market power in California's electricity markets between 1998 and 2001. Existing explanations focus on sellers' short-term attempts to distract regulators from widespread evidence of market power. Using data from three archives and in-depth interviews, I show that the regulators did not fall prey to such “information problems.” Instead, their misperception resulted from a more foundational “worldview problem.” This error affects regulators' basic conception of the marketplace and can be traced to earlier and more gradual forms of influence exerted by utilities that, ironically, would become the victims of market power.1 Introduction 2 Theories of regulatory capture 3 Case: Market power in California's electricity markets 4 Data and methods 5 Findings 6 Conclusion Acknowledgements Open research Reference

The Texas Blackouts and the Problems of Electricity Market Design

Even in an ideal electricity market, reliability is an elusive and precarious byproduct of companies’ search for profits. Since market designers are rarely in a position to enforce this ideal, electricity markets tend to produce poorly maintained infrastructures that collapse as soon as there is trouble on the horizon

Die Investitur mit den Reichslehen in der Frühen Neuzeit

Es besteht eine offensichtliche Diskrepanz zwischen der Bedeutung, die die Juristen des Heiligen Römischen Reichs noch bis zum Ende des 18. Jahrhunderts den lehnsrechtlichen Ritualen zuschrieben, und der Geringschätzung zeitgenössischer Historiker, die sie als „bloße Formalitäten“ abtun. Diese unterschiedlichen Betrachtungsweisen geben Anlass für eine nähere Untersuchung der Rituale der Investitur, durch die die Fürsten ihre Lehen erhielten. Es soll gezeigt werden, dass diese Rituale eine feierliche Darstellung der verfassungsmäßigen Ordnung des Alten Reichs und seiner Standeshierarchie waren.There is an obvious gap between the importance jurists gave to the feudal rituals in the Holy Empire until the end of the 18th century, and the poor opinion historians hold upon these «mere formalities» today. This discrepancy gives reason to a closer look at the rituals of investiture by which imperial princes received their fiefs. It is argued in this paper that these rituals solemnly enacted the constitutional order of the Empire and its hierarchy of ranks. Throughout the Early Modern period, they gave rise to changes and conflicts resulting from the clashing pretensions of the Emperor and the imperial princes. The paper describes these transformations taking them as a seismograph of the institutional and hierarchical changes within the political body of the Empire

Magnetic inflation and stellar mass. III. revised parameters for the component stars of NSVS 07394765

We perform a new analysis of the M-dwarf–M-dwarf eclipsing binary system NSVS 07394765 in order to investigate the reported hyper-inflated radius of one of the component stars. Our analysis is based on archival photometry from the Wide Angle Search for Planets, new photometry from the 32 cm Command Module Observatory telescope in Arizona and the 70 cm telescope at Thacher Observatory in California, and new high-resolution infrared spectra obtained with the Immersion Grating Infrared Spectrograph on the Discovery Channel Telescope. The masses and radii we measure for each component star disagree with previously reported measurements. We show that both stars are early M-type main-sequence stars without evidence for youth or hyper-inflation ( = - ☉ M M + 1 0.661 0.036 0.008 , = - ☉ M M + 2 0.608 0.028 0.003 , = - ☉ + R1 0.599 0.019 R 0.032 , = - ☉ + R2 0.625 0.027 R 0.012 ), and we update the orbital period and eclipse ephemerides for the system. We suggest that the likely cause of the initial hyper-inflated result is the use of moderate-resolution spectroscopy for precise radial velocity measurements.Published versio